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How the Dow's Starting Off Earnings Season

With the official start of earnings season coming after the stock market closed yesterday, you can expect the news to come fast and furious over the next several weeks, and much of that news could move the markets. This morning, though, stocks seem to be shrugging off earnings, with many market participants focusing instead on developments in Europe aimed at fighting the sovereign debt crisis. As of 10:45 a.m. EDT, the Dow Jones Industrials (INDEX: ^DJI) were up just five points, well off opening highs.

Alcoa (NYSE: AA) was the big loser among Dow stocks, giving up opening gains and falling almost 3% despite delivering better-than-expected earnings last night. Although the aluminum producer earned adjusted profits of $0.06 per share, beating estimates by a penny, some analysts interpreted the report as predicting lower aluminum prices in the near future, which would further hurt Alcoa's already weak financial situation. Then again, S&P Capital IQ upgraded the shares from hold to buy based on valuation. Investors should keep a close eye on the company to see which theory proves correct.

American Express (NYSE: AXP) rose a quarter of a percent after analysts at Nomura upgraded the stock. The analyst pointed to the high-quality segment of the credit card industry as having more upside potential than those card issuers focusing on less creditworthy customers, as it downgraded Capital One (NYSE: COF) to neutral. As credit card loan balances have fallen, competition is increasing, and AmEx and its fellow issuers will have to fight to keep the best business.

Finally, Kraft Foods (NYSE: KFT) was the big gainer in the Dow, rising more than 1%. As interesting as its announcement that basketball superstar Magic Johnson has joined its "Campaign for a Name" market push, the move more likely comes simply from the stock's status as a defensively oriented investment. Moreover, as the company comes closer to its split into two separate businesses, investors will position themselves to take maximum advantage of the split-up.

Keep the paceEarnings season has started, but with thousands of stocks announcing earnings, don't get too wrapped up in how the early announcers do. Instead, focus on the stocks that will produce the best long-term results. The Fool's latest special report on the 30 Dow stocks can help you find the three Dow stocks investors can count on for dividend income and growth. The report is absolutely free, so just click here and get your copy today.

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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
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